Apple’s Stock Recovery Is No Recovery At All

By Douglas A. McIntyre Published Feb 23, 8:53AM EST

Quick Read

Apple’s Stock Hasn’t Beat The Market
The Excitement About AI Is Still Strong
Apple Can’t Catch Up In AI Business

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Apple’s (NASDAQ: AAPL | AAPL Price Prediction) stock has partially recovered from a sell-off that hit other large tech companies harder, because they are “dumping” hundreds of billions of dollars into data centers. Apple, the argument goes, does not have this exposure to infrastructure investment. Ryuta Makino, research analyst at Gabelli Funds, told Barron’s, “People do look at it [Apple] as a haven against this big AI spending, this ROI [return on investment] story, just because their capex is relatively low compared to other hyperscalers,”

Opps. Despite a recovery in Apple’s stock following staggering iPhone sales in the last quarter, Apple’s stock is up 8% over the last year, while the S&P 500 is up 15%. Apple has also underperformed the S&P this year. Apple shares are down 3% while the S&P is flat. The Apple earnings “stock recovery” did not last long.

When Apple announced its most recent quarter, Tim Cook, Apple’s CEO, said, “iPhone had its best-ever quarter driven by unprecedented demand, with records across every geographic segment, and Services also achieved an all-time revenue record, up 14 percent from a year ago.” Indeed, iPhone revenue for the period was $85.3 billion, up from $61.2 billion in the year-ago quarter.

The lack of investment in AI, in the eyes of some, is good news. Indeed, Apple is not sinking hundreds of billions of dollars into data centers that may never be in sufficient demand to offset this huge investment. However, what if AI is the wave of the future, as its proponents say it is? Apple is flat-footed, with the primary access to AI for its customers being a deal with Alphabet (NASDAQ: GOOG) to use Gemini to power the AI version of Siri. If Apple is wrong about the gamble, it will never recover because it is already too far behind.

And, Alphabet represents the possibility of tremendous AI returns. Its stock is up 73% in the last year. Gemini use has started to close in on OpenAI’s ChatGPT. Alphabet plans to spend $185 billion on AI this year. That puts tremendous pressure on its balance sheet. Its investors don’t care. AI is too important.

If AI is so critical, in the eyes of investors, for Alphabet, what does that say about Apple?

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.